Are ETF dividends qualified?

Most dividends from US stocks held by ETFs are qualified if you held the ETF 60+ days. Check the 1099-DIV from your broker—they classify it for you.

Do I pay state tax on dividends?

Most states tax dividends as income. States with no income tax (e.g., Texas, Florida) don't tax them. Check your state.

Should I avoid dividends in taxable accounts?

Not necessarily. Qualified dividends get favorable rates. But if you're in a high bracket and have a choice, holding dividend-heavy investments in an IRA can defer or eliminate the tax.

How Are Dividends Taxed? A Complete Guide | Investors Lab

Qualified vs. Ordinary Dividends

Qualified dividends are taxed at long-term capital gains rates (0%, 15%, or 20%). To qualify: stock held 60+ days during the 121-day period beginning 60 days before ex-dividend date. Most US stocks' dividends qualify.

Ordinary (non-qualified) dividends are taxed as regular income. REITs, some foreign stocks, and dividends on stock held < 60 days often fall here.

Tax Rates

Qualified: 0%, 15%, or 20% (same as long-term capital gains).

Ordinary: Your marginal income tax rate (10%–37%).

Minimizing Dividend Taxes

Hold in tax-advantaged accounts: IRAs and 401(k)s—no current tax on dividends.
Hold qualified dividend payers in taxable: Lower rate than ordinary income.
Put bond funds and REITs in tax-advantaged: Their dividends are often ordinary income.
Tax-loss harvesting: Offset dividend income with losses.